UAE's Non-Oil Sector Expands at a Steady Pace

The non-oil sector in the UAE has continued to grow in June due to higher outputs and new orders, but at a slower pace than previous months a new survey shows.

The Emirates NBD UAE Purchasing Managers’ Index (PMI), which is designed to track views in the non-oil private sector on a range of business climate indicators, which slipped to 53.4 in June from 54.0 in May. Though a reading above 50 signifies expansions the latest figures released by PMI were lesser than the average over the past three years (56.3) as the cooling effect of lower oil prices continue. The reading was nonetheless in order with the second quarter trend, Emirates NBD said.

The UAE economy has been one of the most resilient to the oil price crash due to its diversity and action by the government to cut spending, including subsidies- to deal with reduced revenue.

"The UAE is in a better position because of the diverse state of its economy and it helps a lot that the government jumped in early on to adjust to new oil prices", said an economist at the Cairo investment bank EFG Hermes, Mohamed Abu Basha.

Furthermore, the Emirates NBD purchasing manager’s index results revealed that while the non-oil sector remained expansionary, with indications of fragility.

"The rate of hiring was among the weakest recorded by the survey and marginal overall", the report stated. "This was in line with the near-stagnant trend seen over the second quarter."

The PMI also found that the rising cost of labour also contributed to push producers’ cost in June to a nine-month high; during this time for the eighth month running output fell, meaning that producer margins were squeezed.

According to the survey “some panellists indicated that they had offered discounts as part of promotional efforts.”

The PMI reading were in concordance for the most part of recent predictions that the UAE economy would continue to grow, but at a slower rate of that in previous years.

"The output index remains relatively high and we continue to expect solid non-oil growth in the UAE this year," said, Khatija Haque, the head of Middle East and North Africa at Emirates NBD.

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